20140429-大华银行-Regional_Morning_Notes_46页_2mb

Regional Morning Notes Summary - 29 April 2014

Core Content Overview

This document provides a summary of financial results and market analysis for various regions, including China, Indonesia, Malaysia, and Singapore, with a focus on the energy, automotive, and financial sectors. It also includes insights into key indices, corporate events, and investment recommendations.

China Market Summary

Automobile Sector

• 2014 Beijing Auto Show Highlights:
  • Most of the 39 new models were from global carmakers or Sino-foreign JVs, with only four from domestic automakers.
  • Consumers showed more interest in foreign and JV brands.
  • Top Picks: Brilliance, Dongfeng Motor, and Guangzhou Auto are recommended for their strong product pipelines and potential for sales and earnings growth.
  • Sell Recommendations: Geely, BYD, and Great Wall Motor are advised to be sold due to declining market share and over-optimistic earnings expectations.

Company Results

• China Longyuan Power (916 HK):

  • 1Q14 results were in line with expectations.
  • Net income grew 15.1% yoy due to increased wind power output and good cost control.
  • Revenue slightly declined -0.9% yoy due to scheduled maintenance in coal-fired power.
  • Wind power revenue grew 16.8% yoy and accounted for 63.7% of total revenue.
  • Target Price: HK$11.00, with 29.7% upside from current price.

• Key Financials:

  • Projected net profit for 2014 is Rmb3,252m, with adj. net profit also showing strong growth.
  • EBITDA is expected to grow from Rmb10,396m in 2013 to Rmb12,626m in 2014.
  • Net margin is expected to increase from 10.7% to 15.2%.
  • Valuation: Maintain BUY, with DCF-based target price unchanged at HK$11.00.

• Key Metrics:

  • EBITDA Margin: Expected to rise from 54.4% in 2013 to 58.9% in 2014.
  • ROE: Expected to increase from 6.8% in 2013 to 10.1% in 2014.
  • Leverage: Net debt-to-equity ratio is projected to increase slightly, but remains manageable.

• Corporate Events:

  • Comba Telecom is conducting a corporate roadshow in Paris, Milan, London, and Vienna from 5 May to 8 May.

Indonesia Market Summary

• Strategy:

  • Advised to trade out of coal stocks, as they tend to give up absolute returns after April.

• Company Results:

  • PT Wintermar Offshore Marine (WINS IJ):
    • 1Q14 results were in line with expectations.
    • Gross margins showed healthy improvement.

Malaysia Market Summary

• Sector Overview:
  • The oil and gas sector remains attractive to Asian investors.
  • Concerns about earnings delivery in 2014 persist.

Singapore Market Summary

• Company Results:
  • Hutchison Port Holdings Trust (HPHT SP):
    • Profit surged due to disposal gains.
    • Recommendation: BUY, with a target price of US$0.800.
  • Raffles Medical Group (RMFD SP):
    • Results were in line with expectations.
    • Recommendation: BUY, as a preferred healthcare stock.

Key Indices (as of 28 April 2014)

Top Picks

Key Assumptions

• GDP Growth:
  • China: 6.9% for 2014.
  • US: 3.0%.
  • Euro Zone: 1.0%.
  • Japan: 2.5%.
  • Singapore: 4.3%.
  • Malaysia: 5.2%.
  • Thailand: 3.0%.
  • Indonesia: 6.0%.
  • Hong Kong: 3.5%.
• Commodity Prices:
  • Brent: 110 US$/bbl (unchanged).
  • Aluminium: 1,713 US$/mt (down from 1,886 US$/mt).
  • Copper: 6,850 US$/mt (down from 7,354 US$/mt).
  • Gold: 1,200 US$/ounce (down from 1,407 US$/ounce).
  • Iron Ore: 120 US$/mt (down from 135 US$/mt).
  • CPO: 858 US$/mt (up from 736 US$/mt).
  • BDI: 1,500 (up from 961).

Main Points and Key Insights

• Auto Sector:

  • Global brands and Sino-foreign JVs are dominating the market with new models.
  • Domestic automakers are struggling with brand upgrades and face intense competition from JV brands in the mass-market segment.
  • NEVs and hybrid EVs are being launched, but prices are not much lower than foreign models.

• Investment Recommendations:

  • BUY: Brilliance, Dongfeng Motor, Guangzhou Auto, Baoxin, Dah Chong Hong, Zhengtong, and Comba Telecom.
  • SELL: Geely, BYD, and Great Wall Motor.

• Market Catalysts:

  • Faster-than-expected wind power installations.
  • Good wind resources.
  • Fast construction of UHV lines.
  • Reporting of 1Q14 results and April sales data.

• Risks:

  • Macro Risk: Credit tightening could hurt auto sales.
  • Geopolitical Risk: Sino-Japan tensions may impact Japanese car sales in China.

Analysts

• Ken Lee: +852 2236 6760 | ken.lee@uobkayhian.com.hk
• Renee Tai: +852 2826 1324 | renee.tai@uobkayhian.com.hk
• Greater China Research Team: +8621 5404 7225 ext 820 | research@uobkayhian.com

Conclusion

The report highlights a mixed performance across different sectors, with strong results in wind power and mixed outcomes in other areas. It emphasizes the importance of JV automakers in the Chinese market and recommends investors to focus on these players while avoiding domestic automakers. The overall sentiment is cautiously optimistic, with a focus on growth in renewable energy and strategic corporate events.